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Is Evertec, Inc. (EVTC) a Great Stock for Value Investors?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Evertec, Inc. (EVTC - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Evertec has a trailing twelve months PE ratio of 10.72, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 19.72. If we focus on the long-term PE trend, Evertec’s current PE level puts it below its midpoint over the past four years, with the number having risen rapidly over the past few months.
Further, the stock’s PE also compares favorably with the industry’s trailing twelve months PE ratio, which stands at 26.93. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Evertec has a forward PE ratio (price relative to this year’s earnings) of 10.89, so it is fair to say that the stock price might appreciate in near future.
P/CF Ratio
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, Evertec’s P/CF ratio of 9.34 is far lower than the industry average of 20.17, which indicates that the stock is undervalued in this respect as well.
Broad Value Outlook
In aggregate, Evertec currently has a Zacks Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Evertec a solid choice for value investors.
What About the Stock Overall?
Though Evertec might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of C and a Momentum score of B. This gives EVTC a Zacks VGM score—or its overarching fundamental grade—of B. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been pretty favorable. The current quarter has seen five estimates go higher in the past sixty days compared to no lower, while the full year estimate has seen seven upward and no downward movements in the same time period.
This has had a significant impact on the consensus estimate as the current quarter consensus estimate has risen by 5% in the past two months and the full year estimate has gone up by 4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Despite having a bullish trend, EVTC sports a Zacks Rank #3 (Hold). This indicates that analysts have some apprehensions about the stock in the immediate future. Thus, we are looking for in-line performance from the company in the near term.
Bottom Line
Evertec is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 26% out of more than 250 industries) further supports the growth potential of the stock. In fact, over the past two years, the industry has clearly underperformed the broader market, as you can see below:
So, despite a Zacks Rank #3, we believe that bullish analyst sentiment and favorable industry factors make this value stock a compelling pick
Zacks' 10-Minute Stock-Picking Secret
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
But here's something even more remarkable: You can master this proven system without going to a single class or seminar. And then you can apply it to your portfolio in as little as 10 minutes a month.
Image: Bigstock
Is Evertec, Inc. (EVTC) a Great Stock for Value Investors?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Evertec, Inc. (EVTC - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Evertec has a trailing twelve months PE ratio of 10.72, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 19.72. If we focus on the long-term PE trend, Evertec’s current PE level puts it below its midpoint over the past four years, with the number having risen rapidly over the past few months.
Further, the stock’s PE also compares favorably with the industry’s trailing twelve months PE ratio, which stands at 26.93. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Evertec has a forward PE ratio (price relative to this year’s earnings) of 10.89, so it is fair to say that the stock price might appreciate in near future.
P/CF Ratio
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, Evertec’s P/CF ratio of 9.34 is far lower than the industry average of 20.17, which indicates that the stock is undervalued in this respect as well.
Broad Value Outlook
In aggregate, Evertec currently has a Zacks Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Evertec a solid choice for value investors.
What About the Stock Overall?
Though Evertec might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of C and a Momentum score of B. This gives EVTC a Zacks VGM score—or its overarching fundamental grade—of B. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been pretty favorable. The current quarter has seen five estimates go higher in the past sixty days compared to no lower, while the full year estimate has seen seven upward and no downward movements in the same time period.
This has had a significant impact on the consensus estimate as the current quarter consensus estimate has risen by 5% in the past two months and the full year estimate has gone up by 4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Evertec, Inc. Price and Consensus
Evertec, Inc. Price and Consensus | Evertec, Inc. Quote
Despite having a bullish trend, EVTC sports a Zacks Rank #3 (Hold). This indicates that analysts have some apprehensions about the stock in the immediate future. Thus, we are looking for in-line performance from the company in the near term.
Bottom Line
Evertec is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 26% out of more than 250 industries) further supports the growth potential of the stock. In fact, over the past two years, the industry has clearly underperformed the broader market, as you can see below:
So, despite a Zacks Rank #3, we believe that bullish analyst sentiment and favorable industry factors make this value stock a compelling pick
Zacks' 10-Minute Stock-Picking Secret
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
But here's something even more remarkable: You can master this proven system without going to a single class or seminar. And then you can apply it to your portfolio in as little as 10 minutes a month.
Learn the secret >>